While passenger rail transport has been growing in recent years, freight operators across Europe are facing the opposite problem – a decline in demand for their services. We talked about the current situation in the railway transport market with Tomáš Tóth, Chairman of the Board of ČD Cargo, a.s., and a member of the Board of the Confederation of Industry and Transport of the Czech Republic.
Is the situation in the transport market really that bad?
Yes, it is. The situation in the European transport market reflects the generally poor state of European industry and the European economy in general. There are global influences such as the war in Ukraine, ship hijackings in the Suez Canal, unrest in Palestine, and the US presidential elections. Economic development is, of course, also influenced by the ongoing decarbonization of energy and heating, which results in a large decline in interest in solid fuels and the associated drop in transport volumes. Unfortunately, in the case of the Czech Republic, this decline is faster than anyone expected. We also lost around five million tonnes of goods due to the collapse of Liberty Steel in Ostrava. Year-round, the transport of wood also declined – the bark beetle calamity is over, and we are fighting an intense competitive battle for transport in block trains. Industry in general is stagnating not only in the Czech Republic, which logically leads to a lower demand for our services. It’s a simple equation. If our customers aren’t doing well, neither are we in terms of transport volumes. However, to avoid sounding too pessimistic, there are commodities whose transport has actually grown and are promising for the future. For example, fuels, long-growing combined transport, and the automotive sector have been doing well.
You mentioned decarbonization resulting from the Green Deal policy…
The Green Deal is destroying us, and so far, it is completely counterproductive. It is the cause of the high price of electricity, which is a basic cost input into all European economic products, undermining their competitiveness. The price of electricity is significantly influenced by the price level of emission allowances within the EU ETS I system, and this is not the only Green Deal policy measure being accepted on the revolutionary, not evolutionary, path to emission neutrality. It seems to me that people in Brussels live in a completely different reality. Legislative executives with lofty ideals are concentrated there, but they have no knowledge of the business reality of everyday life. The captains of Czech industry, with whom I have the opportunity to sit in the Board of the Confederation of Industry and Transport, mention at every meeting the enormous problems the Green Deal restrictions are bringing with them, and how fundamentally they are changing the functioning of their businesses – engines of both the Czech and European economies.
The decarbonization of energy and industry has a fundamental impact on the decline in ČD Cargo‘s transport volumes.
How is the Green Deal affecting rail transport?
In the case of rail transport, the impacts of the Green Deal are currently nothing but counterproductive. European rail freight carriers are losing transport of fossil fuels to power plants and heating plants, and on the other hand, like the industry, they are facing a sharp rise in the price of traction electricity, which further worsens their competitiveness compared to road transport. In sports terminology, I would call it a double foul. A large decline in interest in solid fuels can be demonstrated by our volumes. While in 2022, we transported 12 million tonnes of brown coal, last year it was just under six million tonnes. And the price of electricity increased by more than 70 percent. Do you need more proof of the poor implementation of green policies? We also have a huge burden in the form of ESG. Large companies can no longer receive an auditor’s opinion on their financial statements without this extensive agenda full of theorizing. But without this reporting, banks won’t lend you money for investments. And so you promise that even in rail transport, which is essentially already green, you will continue to reduce emissions. Europe, however, is not just about the Green Deal, but also about other rather costly projects in our field. I might mention quiet brake blocks or digital automatic couplers. I don’t question the benefits of these projects, but it is essential to realize their financial burden, which again leads to a deterioration in the competitiveness of rail transport compared to road transport. And is it really the right time for them?
As an experienced manager, surely you aren‘t waiting idly for what comes, but are actively fighting the decline in transport volumes…
One way to mitigate the effects of the decline in transport volumes mentioned earlier is to continue expanding internationally. If you look at ten trains from ČD Cargo, six of them go from the Czech Republic to foreign countries, transit through the Czech Republic, end in the Czech Republic, or avoid the Czech republic altogether. Our performance abroad is still growing. For example, the volume of our own transactions carried out by the Austrian branch exceeded two million, representing a 21 percent year-on-year increase. The success of ČD Cargo’s business strategy, focusing on offering complex services along the entire transport route, is demonstrated by the results of the German branch, where the so-called participation transport increased by almost 40 percent to 2.5 million tonnes. Similarly, our foreign subsidiaries were successful in 2024, with ČD Cargo Poland, for example, achieving a record transportation of 541 thousand tonnes of goods in December. Although transport volumes are declining, we are ensuring that our profitability does not go with them.
You mentioned that the problems are not only in the Czech Republic but also in other countries...
When we look around Europe and compare large national “cargos” in neighboring countries, how many of them are profitable? DB Cargo’s results are alarming, as the carrier has long been posting a loss that now amounts to billions of euros. PKP Cargo had to be placed under creditor protection, and there are financial problems in Italy and France. In the first half of the year, Swiss cargo also reported a drop in transport volumes and a loss. Unfortunately, the drop in transport volumes due to the previously mentioned decarbonization and industrial stagnation is already so significant that we need to respond with broader measures. We are scrapping unnecessary wagons and locomotives, digitizing and electronizing our processes, optimizing the service of individual lines, and, unfortunately, we had to take the most painful measure, which is reducing the number of our employees. So far, we’ve managed all those challenges, but that doesn’t mean we can rest on our laurels. I am switching the company into at least a year-long crisis management. We will limit investments, reduce excess capacities, all to ensure we survive and secure our future. ČD Cargo is a great brand, and we have earned respect across Europe. The structure of transport demanded by customers is changing, and the only certainty today is that it will never be the same as we remember it. Therefore, we must change as well. We have a clear goal and plan. It will hurt, but I dare say that with my team by my side, I will lead ČD Cargo through this difficult period.
Tomáš Tóth sees the future of ČD Cargo in combined transport, in line with the company‘s advertising slogan „Across Europe.“
